Americans are delaying pricy purchases

Consumers are feeling the pinch of rising costs. Corporate executives report that some Americans are holding off buying big-ticket items like swimming pools, furniture and electronics and delaying home renovations due to high inflation and interest rate hikes.

Companies like Whirlpool and Home Depot report reduced demand due to higher borrowing costs.

Retail sales data was flat from March to April, indicating consumers’ struggle with rising prices. Mark Mathews from the National Retail Federation noted buyers are more price-sensitive and seeking deals.

The trend suggests that the Federal Reserve’s interest rate hikes may be effective in reducing inflation.

Lower consumer spending is one of the major indicators of cooling inflation.

At the same time, higher-income people continue spending on luxury items like Generac’s power generators, showing less sensitivity to interest rate changes.

BlackRock’s chief investment officer Rick Rieder recently suggested that the Fed should lower interest rates to combat inflation instead of maintaining them at high levels.

He argues that high benchmark rates benefit wealthier Americans through increased earnings from fixed-income investments. It allows them to spend more on services, fueling inflation. He cited examples of rising service costs, such as auto and health insurance.

Rieder says maintaining price stability, high employment and workforce growth while moderating growth could be beneficial in taming inflation.